1. Department of Economics Food and Fuel Issues Iowa Seed Association Annual Convention Ames, Iowa November 18, 2008 Chad Hart Assistant Professor of Economics/Grain Markets Specialist Iowa State University chart@iastate.edu 515-294-9911

2. Department of Economics ItemFinalFinalFinal 200520062007 Consumer price indexes Percent change All food2.42.44.0 Food away from home3.13.13.6 Food at home1.91.74.2 Meats, poultry, and fish2.40.83.8 Eggs-13.74.929.2 Dairy products1.2-0.67.4 Fats and oils-0.10.22.9 Fruits and vegetables3.74.83.8 Sugar and sweets1.23.83.1 Cereals and bakery products1.51.84.4 Nonalcoholic beverages2.92.04.1 Other foods1.61.41.8 Change in Food Price Indexes, 2005-2007 Sources: Bureau of Labor Stats., USDA-ERS

3. Department of Economics Corn Prices Source: CBOT

4. Department of Economics U.S. Ethanol Production Source: Renewable Fuels Association

5. Department of Economics U.S. Food Marketing System Five distinct sectors Agricultural production 2 million farms Food processing and manufacturing 25,000 food and beverage companies Wholesale distribution 33,000 food wholesalers Retail distribution 113,000 food retailers 378,000 foodservice companies Consumption 111 million households

6. Department of Economics U.S. Food Marketing System In 2001, government estimates showed: 23.7 million employed in the food system 12% of the nation’s gross domestic product Food is a major component of our economy Each step in the system adds value and costs

7. Department of Economics The Food Dollar Source: USDA-ERS

8. Department of Economics Declining Farm Value in Food Source: USDA-ERS In the 1950s, 25% of food was consumed away from home. Today, nearly 50% of food is consumed away from home.

9. Department of Economics Farm to Retail Food Price Spread FoodFarm Value Share of Retail Food Price FoodFarm Value Share of Retail Food Price Eggs53Canned Corn22 Beef49Sugar27 Chicken48Wheat Flour19 Milk34Bread5 Pork31Corn Flakes4 Orange Juice33Corn Syrup3 Source: USDA-ERS, 2001

10. Department of Economics Factors Leading to Higher Commodity Prices Source: USDA-ERS, Trostle, July 2008

11. Department of Economics Commodity Price Indexes Source: International Financial Statistics

12. Department of Economics Population 2008 2020 2050 (billion) World6.678World7.601World9.393 China1.330China1.431India1.808 India1.148India1.362China1.424 U.S.0.304U.S.0.336U.S.0.420 Indonesia0.238Indonesia0.268Nigeria0.357 Brazil0.192Brazil0.212Indonesia0.313 Pakistan0.168Pakistan0.204Bangladesh0.280 Bangladesh0.154Bangladesh0.190Pakistan0.278 Russia0.141Nigeria0.184Brazil0.228 Nigeria0.138Russia0.132Congo0.189 Source: U.S. Bureau of the Census

13. Department of Economics Countries Pursuing Biofuels  US  Brazil  Argentina  Colombia  Paraguay  Canada  Uruguay  Mexico  Thailand  New Zealand  South Africa  South Korea  Philippines  Indonesia  Pakistan  China  India  Malaysia  Australia  Japan  EU  Russia  Not a complete list

14. Department of Economics Events in 2007 Droughts: Northern Europe, Ukraine, Russia, Northwest Africa, Turkey, Australia, and Argentina Increased export taxes: China, Argentina, Russia, Kazakhstan, Malaysia, and Indonesia Export restrictions: Argentina, Ukraine, India, Vietnam, Serbia, Egypt, Cambodia, Indonesia, and Kazakhstan

15. Department of Economics Commodity Price Ratios (Sept. 2006 =1)

16. Department of Economics Change in Food Price Indexes, 2005-2009 ItemFinalFinalFinalForecastForecast 200520062007 2008 2009 Consumer price indexesPercent change All food2.42.44.05.0 to 6.04.0 to 5.0 Food away from home3.13.13.64.0 to 5.04.0 to 5.0 Food at home1.91.74.25.5 to 6.54.0 to 5.0 Meats, poultry, and fish2.40.83.83.0 to 4.05.0 to 6.0 Eggs-13.74.929.213.5 to 14.51.0 to 2.0 Dairy products1.2-0.67.48.0 to 9.04.0 to 5.0 Fats and oils-0.10.22.913.0 to 14.03.0 to 4.0 Fruits and vegetables3.74.83.86.5 to 7.53.5 to 4.5 Sugar and sweets1.23.83.14.5 to 5.53.0 to 4.0 Cereals and bakery products1.51.84.49.0 to 10.03.5 to 4.5 Nonalcoholic beverages2.92.04.13.5 to 4.53.0 to 4.0 Other foods1.61.41.84.0 to 5.03.0 to 4.0 Sources: Bureau of Labor Stats., USDA-ERS Updated October 20, 2008

17. Department of Economics Quick Notes Farm value is less than 20% of the food dollar. Costs beyond the farm gate make up more than 80% of the food dollar. Labor, transportation, energy, advertising, etc. There have been a number of factors influencing food and commodity prices. USDA Chief Economist Joe Glauber recently stated that biofuels are responsible for 10% of the inflation in food values.

18. Department of Economics Thank you for your time! Any questions? http://www.econ.iastate.edu/faculty/hart/